THE CLAIRE FOSS JOURNAL
BANK BILKS INVESTMENT FUND
The Associated Press
Published: Apr 11, 2003
WEST CHESTER, Pa. (AP) - An investment services company has sued Citibank and brokerage house Salomon Smith Barney, alleging the firms fraudulently sold it $70 million of worthless Enron Corp. bonds. The Vanguard Group's lawsuit describes a circular investment "scheme" in which Citibank and Salomon Smith Barney circulated Enron financial statements that Vanguard claims were false and misleading.
The civil lawsuit, filed Wednesday, alleges the schemes disguised Enron's mounting debts to Citibank as normal commodity investment accounts, which were used to back Enron bonds. Those bonds were then sold to investors, including Vanguard.
The investments turned out to be worthless when Enron went bankrupt in 2001.
Vanguard's mutual funds were duped into buying the bonds through "false and misleading" financial statements in which Citibank failed to disclose Enron's financial situation and its own role in the deals, the lawsuit alleges.
Dan Noonan, a spokesman for Citigroup, the parent company of Citibank and Salomon Smith Barney, declined to comment on the lawsuit. Noonan referred to a December statement in which Citigroup said the firm acted at all times in the good faith belief that the transactions complied with existing law and standards.
Vanguard attorney Pauline C. Scalvino said the lawsuit followed the disclosure of Enron's relationship with Citibank and Salomon Smith Barney during U.S. Senate hearings on Enron over the last year.